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Overview

Decentralized exchanges are decentralized financial (DeFi) platforms where cryptocurrency is traded through peer-to-peer transactions in exchange for other cryptocurrencies for an equivalent value.
There are a number of DeFi applications built on the Algorand blockchain that offer different services and features like swapping and trading crypto, staking Algorand native tokens in liquidity pools. Transactions on Algorand are currently cheaper and faster than other blockchains like Ethereum.
These protocols and instruments are often open-source and permissionless, meaning anyone can use them without having to go through an intermediary by connecting their hot wallet.
In many ways, this makes decentralized exchanges safer and mitigates the risk of market manipulation and being hacked as there is no transfer of assets to a third party like with a centralized exchange.

Key Takeaways For Creators and Collectors

Complete decentralization is not possible for the time being as it’s still necessary to use centralized exchanges to fund a wallet in exchange for fiat currency initially. Still, creators and collectors can benefit from these platforms by being able to:
  • Swap cryptocurrency with cryptocurrency to receive the equivalent value thereof and diversify your portfolio
  • Incredibly high interest staking to make more cryptocurrency from your portfolio as opposed to simply “hodling” it long-term in your wallet (holding on for dear life)
  • Supply tokens as collateral to earn interest and enable lending or borrow tokens against your collateral
* high-interest DeFi products are risky, DYOR before investing
‍Want to learn more about decentralized exchanges?
Check out our comparison of leading Algorand DEXes.